A crucial time for Medi-Cal

The U.S. healthcare overhaul gives the state a chance to improve the program for the poor.

Gov. Jerry Brown has thrown his support behind expanding Medi-Cal, the health insurance program for impoverished Californians, to the full extent authorized by the 2010 federal healthcare reform law. It was the right choice, and Brown deserves credit for recognizing that the benefits to public health and the economy outweigh the potential costs. But his budget proposal left state lawmakers to decide whether to keep responsibility for the expanded program in Sacramento or hand it off to the counties. And while it's worth reevaluating how to pay for the medically indigent, it would be a disaster to transfer so much of Medi-Cal's duties to ill-prepared local authorities.

Medi-Cal is the state's name for Medicaid, the health insurance program whose costs are split by the federal and state governments. The federal Patient Protection and Affordable Care Act expands Medicaid to cover all families and single adults with incomes of up to 138% of the federal poverty line, starting in 2014 — a change that could bring coverage to millions of uninsured Americans, if states decide to go along.

To make the expansion more affordable for cash-strapped states, Washington will cover 100% of the medical costs of the newly eligible recipients through 2016. The feds' share will gradually drop to 90% in 2020, but the billions of dollars in aid is expected to generate a considerable amount of economic activity and tax revenue to help offset the state's costs.

One alternative floated by Brown would be to have counties take full responsibility for the newly eligible Medi-Cal beneficiaries, building on the Low-Income Health Programs that many of them launched two years ago for indigent adults not eligible for Medi-Cal. That's unworkable, however; seven counties don't have such programs today, and the rest take varied approaches that run afoul of Washington's demand for Medicaid uniformity within a state.

The other alternative laid out by Brown would be for the state to take responsibility for the newly eligible, with counties giving back at least some of the aid they receive from Sacramento for treating the indigent. That sort of recalibration is inevitable, but it should wait until it becomes clear how many indigent, uninsured Californians remain dependent on county health systems after Medi-Cal expands. Counties also legitimately argue that their current programs are grossly underfunded, and they need to keep getting the state aid to retool into more efficient, high-quality systems that can compete for insured patients as well as treating the uninsured.

With the federal government footing all the treatment costs for the newly eligible for three years, the state has the rare opportunity to explore ways to improve Medi-Cal, rather than just struggling to hold down expenses. The state and counties can decide later how to split the long-term bill.